Abstract
Small and medium businesses in pilgrimage tourism are one of the most vulnerable sectors in the post-pandemic due to product innovation and business activities. This study aims to investigate the impact of locus of control and environment on business performance, as well as to examine the role of product innovation. The data of this research were retrieved using a self-administered survey from small and medium businesses on Islamic pilgrimage in East Java of Indonesia. Using structural equation modeling, the findings indicate that locus of control and environment can support product innovation and small-medium business performance. Furthermore, this present research shows that there is a robust link between product innovation and performance. This research also reveals that product innovation partially mediates the link between locus of control and business performance, as well as the environment and small-medium business performance in pilgrimage tourism. These findings raise the need for small and medium enterprises to take the initiative for product innovations to escalate business performance.